Question-and-Answer Session
Operator
(Operator instructions) Our first question today will come from Matthew Heimermann with J.P. Morgan.
Matthew Heimermann – J.P. Morgan
Hi, good morning everybody. Couple of questions, maybe I will just go one at a time. First question I had was just on the development you saw coming out of the quarter. Was that part of the mid-year review process? And then also specifically with the legal liability book, where you increased the current accident year loss ratio, was that a byproduct to the analysis? And I would just be curious whether or not the – whether or not that was being driven by reported claims or just trends you are incorporating into IBNR?
John Marazza
Matthew, this is John. You are correct. The reserve adjustments that we do are primary reserve analysis, both our internal analysis and outside actuary's analysis is done on the June 30 number. So, that’s what gave rise to the prior period adjustments. With the –
Richard Smith
I’m sorry. I was just saying reinforced in that. John’s right. We did see continued favorable emergence in the third quarter, which drove part of the decision to release at this point.
Matthew Heimermann – J.P. Morgan
Right.
John Marazza
And then the question of legal liability was – yes, we saw those trends – yes, we have seeing those trends for the first six months of the year. When the actuaries did their June 30 work, they confirmed our suspicions that the frequency and severity were above what we would have anticipated. So we did increase prior accident years' reserves for legal liability and we increased our current year loss ratio selection for that line.
Matthew Heimermann – J.P. Morgan
Can you just opine on whether or not that’s more a function of frequent fears – I mean I'm guessing it is mostly just a frequency issue at this point?
Jim Thomas
Actually, Matt it’s really – this is Jim Thomas. It is really more severity related. This is a claims made line of business. So, the number of claims you have reported are known and don't change. So, there is really no IBNR on reported claims. So, it is really the continuing development of the existing phases that we have and they take a long time to develop because of the nature of the liability.
Matthew Heimermann – J.P. Morgan
Okay. And then just the question, is this primarily – I mean you changed the current accident year – so obviously you're trying to pull this forward. But is there any particular – is this primarily an issue for 2007, 2008? Was it – does it include – I would just be curious when the when you started to see the inflection point?
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